Assume Mortgage

[Bindy25]

When you assume over a mortgage, 0 down. How does this exactly work? What are the pro's and con's of this! Thanks.

 

[GaryMcGowan]

The buyer will still have to qualify for the mortgage under the Lender's rules.

The mortgage may be valued higher than the value of the property thus putting the property under water

The mortgage rate may be lower or higher than today's rates



The pro are as you said is Zero down. You really need to understand the terms of the mortgage. I would have my lawyer review the terms and consult my mortgage broker for my best options.

Assume a mortgage can be expensive if you have not done your due diligence.

 

[Thomas Beyer]

If you assume a mortgage without qualification you risk the bank calling the loan due as they could deem the loan in default. They may do it, but often do not. This risk increase if the interest rate spread on the assumed mortgage and current mortgage rates is high, i.e. if the bank could make more money getting a new loan.



The benefit might be lower interest rates of the assumed mortgage than current market rates.

The drawback might be higher interest rates of the assumed mortgage than current market rates.



Another benefit [mainly to seller] is no discharge penalty.



A 3rd benefit [to buyer] is access to a mortgage that s/he couldn't get on new qualification.



btw: is this mortgage CMHC insured ? If assumed, the seller is still at risk, unless his obligation is discharged in writing.

 

[Bindy25]

Thanks